Correlation Between RB Food and CK Power

Can any of the company-specific risk be diversified away by investing in both RB Food and CK Power at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining RB Food and CK Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RB Food Supply and CK Power Public, you can compare the effects of market volatilities on RB Food and CK Power and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in RB Food with a short position of CK Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of RB Food and CK Power.

Diversification Opportunities for RB Food and CK Power

0.71

Correlation Coefficient

RB Food  CK Power

Poor diversification

The 3 months correlation between RBF and CKP-R is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding RB Food Supply and CK Power Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CK Power Public and RB Food is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on RB Food Supply are associated (or correlated) with CK Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CK Power Public has no effect on the direction of RB Food i.e., RB Food and CK Power go up and down completely randomly.

Pair Corralation between RB Food and CK Power

Assuming the 90 days trading horizon RB Food Supply is expected to under-perform the CK Power. In addition to that, RB Food is 1.15 times more volatile than CK Power Public. It trades about -0.25 of its total potential returns per unit of risk. CK Power Public is currently generating about -0.15 per unit of volatility. If you would invest  320.00  in CK Power Public on December 28, 2024 and sell it today you would lose (66.00) from holding CK Power Public or give up 20.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

RB Food Supply  vs.  CK Power Public

RB Food Supply

Risk-Adjusted Performance

Very Weak

Over the last 90 days RB Food Supply has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

CK Power Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days CK Power Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RB Food and CK Power

The main advantage of trading using opposite RB Food and CK Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RB Food position performs unexpectedly, CK Power can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CK Power will offset losses from the drop in CK Power's long position.

The idea behind RB Food Supply and CK Power Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .